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The American Foreign policy pre & post-Shale Revolution

By : Rasti Ranj Sahebqran
2016-05-22 23:03:58

 

Introduction

Oil has had a leash around politics and foreign policy for a century, a leash that extended from the Middle-East and across the pacific reaching to the United States. Oil, a dark colored, thick, smelly substance, found its way to the heart of foreign policy, international conflict from Sykes-Picot treaty, WW2, up till the war on Iraq. A substance so filled with energy that it’s worth deploying armies to secure the National security of the USA. Oil is not alone to carry these characteristics. Gas, another subsistence dwelling underground, gaseous in nature, with a substantial amount of energy.  Those two substances have been the key to the power of the Middle-East in their deal with the West as they exist in their conventional form there. Conventional oil or gas is easy to capture, running smoothly from the belly of the ground with little energy to find itself in tankers to be carried around the globe to their destination. Conventional oil has had its fluctuation in terms of access and prices. This lead to the quest for unconventional oil. Unconventional oil is defined by Bridge and Le Billon in their book Oil as mostly hydrogen-enriched synthetic crude recovered from sand and rock” (Gavin, Le Billon 2013). This unconventional oil, unlike conventional lies in US ground, enabling it to secure some if not all of its energy requirements in the future. Oil has kept US foreign policies strapped in a jacket, forcing it to look the other way from the practices done by its allies” in the Middle-East.  While US was obligated to have strong ties with KSA and heavy presence in the Gulf region, this obligation is no longer valid. Before this change, USA was dependent on energy sources outside its terrain, and this had implications on the energy map, geopolitics, and all its foreign policies towards oil producing countries. This all is about to change due to the shale oil revolution. The changes that have occurred in US foreign policy, pre and post-shale revolution are in terms of security, economy, and politics

Security: Military Presence, Allies, Energy Markets

 Security is one of the aspects of that change. Security can be measured in different ways, one being the military presence of the USA in the Persian Gulf. It is no mystery that the United States have established numerous amount of military bases all over the Middle-East region, except for Iran. These bases were established to protect the United States energy security. In the pre-shale environment, USA was zealot in protecting its energy security, thus it was justified to intervening militarily. An example for that is the United States quick intervention in the Iraqi invasion of Kuwait. These troops might still be based in Kuwait, but it is obvious that their objectives have changed. Security of the reign of Saudi Arabia will not be a concern to the American energy security plan. After the Shale revolution, the US foreign policy regarding security has changed. Obama was elected president in 2009, and the country was devastated by two Capital-consuming wars, Iraq and Afghanistan. The country was also going through a financial crisis. Obama thought that the first step to building the nation is starting with the country itself. Obama’s administration adopted a restrained foreign policy. This is obvious through the examples of Syria, Mali, and Libya. Saudi Arabia is involved in the Syrian crisis. The US did not have a strong presence. (Howald, 2013). The US has almost always sought for diplomatic resolutions of the crisis of the Middle East post Shale revolution. This shows that the military bases are not as crucial to the American energy security as before. The military bases was the tool of energy security of the US. However, the international community has moved from the realist view of foreign relations to a more moderate and liberal view. As diplomatic influence is more influential than military in most occasions, the US has always tried to keep its global influence as strong as its military power. In Pre-Shale revolution, the US secured the supply of the energy through the military basis established in the Gulf countries. In post Shale revolution, the core of the energy security of the US has been securing open and free market or energy as David Goldwyn, who is the State Department’s special envoy for International Energy Affairs, mentioned. The open, fair, and transparent market is not the only priority for the US energy security policy. The US is also trying to bring together China, Russia, India, and Brazil and develop new partnership agreements. In the pre-shale revolution, the US maintained security in the countries that monopolised the energy market. Thus, the security of those countries would mean the security of the supply of energy to the US. In the post-shale revolution, the US is trying to change the monopolising characteristics of the energy market into a free, open, and transparent market. The reason for this is that the US is now a supplier too. Thus, a more open and free market would mean that the US has equal chances along with the competitors, and it would mean that the competition would decrease the prices which is of great benefit for the US as a consumer (Steinberg, 2011)

  The Shale revolution also affected the Gulf countries autocracies relations with the US. Pre to the revolution, part of the energy security policy was to secure the autocracies so that the stability remains in the gulf. This is the main reason that the US has not made any remarks concerning Saudi Arabia’s anti-human freedom policies. This was also one of the main reasons for the military bases. After the Shale revolution, the US was not inclined to invest in stabilising the middle-East. The US saw no reason to interfere with the changes occurring in the region because of the Arab spring, despite its threat to its allies such as Saudi Arabia. Post-revolution, the US adopted more diplomatic approach concerning disputes in the Middle-East. The US sought a diplomatic conversation with Iran despite its rivalry with Saudi Arabia. The talks between the Iranian government and the US in order to reach a deal has raised fear among the gulf states of military withdrawal. Although the US department of State refused such claims, but the fears remained (Westphal, 2014). The Shale revolution has not been very effective in regard to the approach of the US to gulf countries. However, in the near future, the shale revolution might cause negative impacts on the United States as they lose their influence as a major importer of oil . In the short run, the objectives of the US presence in the Middle-East has shifted away from securing the oil supply from the Middle-East to the US, but the presence remains. The shale revolution is still young, therefore, its impact is still not fully identified. Some speculate that the US presence will diminish, yet others are finding that it will remain the same because of issues that concern the global community such as terrorism (O’Sullivan, 2014).  

Economy: Energy Dependance, Energy Map, Markets & Resources

The shale revolution drew a line between the era before it, and after it. The change in US Included different aspects such as energy dependency, redrawing of the global energy map, and the development of market seeking strategies compared to the previous resource seeking/securing strategies.

Before the Shale revolution, US policy-maker kept on showing concerns about the country’s energy dependency on imported energy. These concerns existed since the second world war. They were focused on in the 1970s when oil prices sharply rose and led to economic recessions, stagnation, and eventually high inflation. These were due to the United States being a net oil importer. While some states would benefit from the rising oil prices such as Texas and West Virginia, more than forty other states are hurt by sharply rising prices that lead to supply shocks.  After the Shale revolution—which ultimately led to an energy revolution—, The united states stimulated the huge production of oil and gas. The timing aided by providing a mix of advanced technologies such as horizontal drilling and coupled with the high oil prices that led to more production. This resulted in domestic energy resources, which led to decreasing the dependency on imported energy and aided in diversifying the economy (Brown, 2013).

 The decrease in dependency on imported energy aided in creating a more secure energy source other than importing it from politically unstable regions, while increasing the diplomatic maneuver of united states. While many experts in 2009 expected that the country’s dependence on imported energy to increase, the situation has changed radically since then. The American domestic oil production is currently at its highest in 15 years. EIA (Energy Information Agency) predicted that  the US will not only become import dependant, but it could also become a net exporter of gas by 2020. The revolution includes crude oil too since the US has been successful in increasing their production from 5 to 6.5 million barrel per day. The oil share of import has also decreased from more than 60% in 2005 to 40% currently. OPEC countries such as Saudi Arabia comprise about 50% of the imported oil to the United States. This decrease in independency will result in  redrawing the global energy map.

The Graph indicates both imports and exports in the US. With Imports increasing, but eventually decreasing in the last years, while the petroleum and gas exports and continuing to increase (Howald, 2013).

The shale revolution affected, and would continue to affect the redrawing of global energy map. Even though the revolution is considered to be a central accelerating factor in redrawing the map, other factors also contribute such as the increase in demand in East Asia and the Middle East. The shift will mainly occur by changing the US into a leading oil and gas producer alongside being a consumer while countries such as the Gulf states are changing toward being significant consumers. The rapidity of changes in the global energy map is accompanied by its’ unpredictability  of supply since they are based on technological advancement, cost, and restriction on productions. The demand unpredictability exists too, since it is dependent on the economic performances and growth of countries in Asia such as China, India, and East Asia, in addition to the uncertainty of new sources such as nuclear power. The redrawing of energy map is occurring while some companies applying the Wait and See” rule, and not risking big investment in new fields. They mainly focus on smaller fields that are close to its consumers and have shorter investment cycles. The futuristic forecast is filled with uncertainty, and it will remain as such due to current development such as the Russian-Ukraine crisis and political development in both Iraq and Iran (Westphal, 2014).

              The increase in the production of oil and gas due to the shale revolution led to different debates on how to absorb the abundant resources. Different possibilities are assumed, in which exporting oil is one of them. This requires the removal or amendment of the law that bans oil export (EIA, 2015). The oil export ban existed for more than 40 years, but less than a year ago, a legislation that was unpredictable life the ban on oil in the united state. The US oil sale to foreign buyers started very quickly after president Barack Obama signed the bill to lift the oil export ban. The first ship sailed from Texas towards Germany. The future of the oil export is dependent on the global oil prices and the rise in demand for oil (Sider, 2016).

 This indicated that the US is not only moving toward an Energy-independent State but also aiming for exporting their products. The lift on the ban will result in stimulation of oil production and hence lead to the better economic situation. The benefits include macroeconomic and industrial sector benefits. The ban lift will result in macroeconomic benefits such as an increase in GDP by $165 Billion, and the addition of more than 630,000 jobs while a significant increase in household income to as much as $2000 by 2025. The industrial sector benefits include an overall increase in different sectors such as durable goods, machinery production, agriculture, mining, and construction. However, the increase in US production will not result in decreasing dependence on foreign oil, since the US oil is a light and sweet nature, and it is not suitable for domestic refineries. The refineries have been modified to refine the heavier crude oil that is widely imported in the US, and using these refineries for domestic oil will result in low efficiency. In terms of its effect on foreign policy. The US strategic changes from seeking only resources to seeking markets will result in a stronger position in the global market, reinforce the strength of the market, and ensure that the US economy continues to grow (Duesterberg, 2014).

Politics: Changes with Europe, Middle-East, and Asia

The political forces are evidently a strong and affecting part of the ups and downs of the shale oil revolution. Although many of its factors are related to economic reasons, politics plays a bigger role in the changes that have occurred. The whole world is bound together by an invisible knot that makes the effects of international relations inevitably intertwined. This relationship has caused the US foreign policy to intervene in most, if not all, matters of shale oil production. The USA's independence and self-sufficiency to the production of oil change the game for countries of the Middle East, Europe, and Asia as a whole.

 The US’s increase of shale oil production and revenue will first and foremost affect the international relations and policies of the Middle Eastern countries that produce energy. These countries have, since the past century or so, held the upper hand in the production and exporting of oil. The Middle East has always had dominance in the market of oil extraction. However, the newfound revolution revolving the US has evidently made it clear that the Middle East will no longer remain in such a position of power with such an influence over the world. Thus, this means there will be an intermediate effect in their foreign policies, which will then lead to changes in the rest of the world’s foreign policies, especially the US’s. Furthermore, alliances and relationships such as military and commercial will become much weaker, causing a strain in the geopolitics of the production of oil and its reserves. The Middle East will, therefore, lose allegiance with the US and maybe turn to other parts of the world for alliances and contracts, such as Russia. The US will no longer need the help and support for military services from the Middle East as it will grow its own dependence on energy imports (Westphal, 2014)(Plumer, 2014).

 The US has also targeted the European countries, as a whole. For example, they have aimed to give facilitated access to the North Atlantic Treaty Organisation, otherwise better known as NATO, for gas and oil as a means to decrease Europe’s dependence on Russian production and import of oil. This action will solidify Europe’s energy security and guarantee it to the foreign policies of the US in regard to the Shale oil revolution (Howard, 2014) (Johnson, 2015).

Moreover, the global energy security has had a major influence in the changes of the US’s development towards a sustainable provision of its own. The benefits of such production have led to ensuring the availability as well as affordability towards Asian energy security. China, for example, is the world’s largest target for the import of oil, holding the world’s largest shale oil and gas resources. Although they lack the technology for the necessary production of oil, the further attempts to produce from their own reserves is the main concern. The need for such technologies is what ties Asia (specifically China) to the US with its many interactions. (Johnson, 2015

Conclusion

The influence of the shale revolution is still yet unknown. It was years until the influence of the previous energy map was evident, therefore, it would take a time to understand the changes occurring now. Many aspects are involved in this change, and due to globalization, this aspect will not only influence the US and its previous oil exporting allies, but it would influence the international community as a whole. An imported may have left the energy map, but it emerged as a self-sufficient exporter that will offset the current equilibrium in the energy market. The United States needs to use its increasing independence from conventional oil while remaining influential in the oil producing regions. It also needs to situate itself in a more appropriate location in the energy map, not as a consumer but as a producer as well. This will create a new challenge for America and the rest of the world. The Shale revolution will mark a new era for the modern economic world which will in turn influence the international relations of the world we live in today.

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